High net worth and ultra high net worth individuals have special considerations when it comes to protecting their assets through insurance. At Dynamic Insurance Solutions, we have extensive experience managing the needs of ultra high net worth individuals. I personally have an MBA from theh Harvard Business School, and have been blessed to be around very wealthy individuals for most of my life, and during that time I have learned a thing or two about a few “gotchas” that they should think about when considering their insurance on the island.
The most expensive and most desired real estate is often the hardest to insure
Puerto Rico is still very much tied to the global insurance market, as local insurance companies, just like everywhere in the world are raising their rates and tightening their underwriting criteria as reinsurance rates skyrocket. The most desirable real estate in Puerto Rico tends to be very close to the ocean, which carries the most risk of damage in the event of a hurricane. It may surprise you to know that many multimillion dollar properties are not insured at all, as sometimes there is just no insurance company that wants to take the risk. This mainly applies to properties directly on the waterfront or less than 150 meters or so from the waterline. Most properties in Dorado Beach, for example, are not difficult to insure because they are a safe distance from the water, but most properties in Ocean Park, on the other hand, are very diffiult to insure. Same goes for all the beachfront condos anywhere on the island.
Other areas that have difficulty for receiving insurance quotes are Old San Juan and the island municipalities of Vieques and Culebra.
Higher liability limits
This should be obvious, but the more money you have, the bigger and more likely target you become for lawsuits and other liability claims. While most individuals would be more than adequately served by a $1 million personal umbrella liability limit, an ultra high net worth indiviudal may need much more. If the plaintiff knows you have $100 million of assets, they will go after as much as they can, and you need to be protected.
Personal Umbrella
Umbrella coverage is an often misunderstood, but a very important and often inexpensive element of coverage. Umbrella policies go on top of an underlying policy, and kick in once your underlying limits are exhausted. Since they are rarely used, they can provide lots of coverage for very low amounts.
Life Insurance
Obtaining a Puerto Rico life insurance policy can also be a good way to show closer connection to Puerto Rico.
Life insurance policies have long been known as a tax effiecent way to pass wealth on to subsequent generations, and in Puerto Rico they work the same way.
The top insurer, MassMutual, also operates in Puerto Rico and can offer life insurance policies to residents.
It is common for ultra high net worth individuals to purchase face values of life insurance composing a high portion of their net worth. This would typically come with a corresponding large cash outlay to pay for the policy, but these large policies are often paid with the aid of low interest pledged asset loans.
Evacuation Insurance
One of the big limitations of living in Puerto Rico is that, unfortunately, the healthcare system has been in decline for many years and is now in a state of extreme strain. High net worth individuals have access to concierge health services which can provide on-demand services for added fees, allowing them to avoid the often months long wait for specialists. This type of service; however, won’t cover the very real need that arises in the event of an emergency. While Puerto Rico has highly qualified doctors that will attend to your needs if you visit a top Emergency Room like the one at Centro Medico, HNW individuals will want to have an option to get to the mainland ASAP for medical care should they need it. This is where medical evacuation insurance comes in.
Will my mainland insurance cover me in Puerto Rico?
It’s very important to note that no mainland insurance companies provide coverage for property in Puerto Rico. While it is true that some traditionally large insurance companies in the US have a local presence, such as Liberty Mutual and Chubb, it should be noted that all of these companies only offer what are called “special lines” on the island.
Will my Puerto Rico insurance cover me outside the island?
Generally, insurance in Puerto Rico will not cover you outside of the island, with a few exceptions:
- Your auto insurance policy will cover you in the mainland, which means your PR limits will transfer to any rental cars you use while on the mainland.
- Your umbrella policy will cover liability worldwide.
- Puerto Rico health insurance policies generally cover emergencies in the mainland, but check with your specific provider for terms and conditions.
Closer connection test considerations
As a new high net worth resident of the island, you will want to ensure you leave no doubt that your new tax resident is in Puerto Rico, and not the mainland US. This is true even if you do not have a tax incentive decree. In fact, it is even more important if you don’t have a tax incentive decree, because you will be paying standard Puerto Rico tax rates, which are very high, and you certainly don’t want to double pay the IRS and Hacienda. Insurance is an excellent, but often underutilized, way to establish a closer connection to the island. It is likely that local insurance products can cover most, if not all, of your previous coverages on the mainland.
Consult with a specialist
If you want a specialist to take a look at your specific situation and provide you with some options and recommendations, feel free to reach out to us, and we’ll be happy to chat with no obligation.